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We’ve compiled a list of the 100 most commonly asked questions we have received on the federal Fair Labor Standards Act (FLSA) overtime regulations.
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This report, "Top 100 FLSA Q&As", is designed to provide you with an examination of the federal FLSA overtime regulations in Q&A format, including valuable tips for bringing your workplace into compliance in an affordable manner.

At the end of the report, you will find a list of state resources on wage and hour issues. This report includes practical advice on topics such as:
  • FLSA Coverage: How FLSA regulations apply to all employers and any specific exemptions from the overtime requirements
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June 06, 2007
How to Reconcile the 'Total Compensation' Disconnect

Do your employees know how much you're paying them? Of course, they know the amount on their paychecks. But do they understand the true cost to the company of employing them?

For a Limited Time receive a FREE Compensation Special Report on the "Top 100 FLSA Q&As," designed to provide you with an examination of the federal FLSA Overtime Regulations in Q&A format, including valuable tips for FLSA Coverage, Salary Level, and Deductions from Pay. Download Now

Don't answer before you see the results of a pair of recent surveys by the Charlton Consulting Group. David Janus is a principal with Charleton (, a benefits communications and technologies firm. Their surveys, one conducted among employees and one among HR and employee benefits executives, finds that there is a decided disconnect between what employers pay out in total compensation and what employees believe they are paid.

According to the Department of Labor, company costs for employee benefits average about 43% of pay. Yet, when Charlton asked employees how much their benefits cost their employers as a percentage of their pay, most believe the figure to be much lower. "Fifty-one percent of full-time workers have the impression that their employer pays 30% or less, over and above wages, for their employee benefits," Janus says. And when they asked HR and benefits executives how well their employees understand the costs involved, the disconnect became obvious. "Only about five percent of the (surveyed) HR/benefits executives really felt that employees fully understand and appreciate the value of their overall compensation package," he says.

While those facts are interesting, the two most critical points are these:

  1. "There is a very high correlation between employees' understanding of their total compensation, and their satisfaction with it. Specifically, 75% of employees who said they are very satisfied with their total compensation also reported having, at a minimum, quite a bit of understanding of their benefits package. And the converse is true; a high percentage of the people who report that they don't understand a whole lot about their benefits package are not satisfied with it," Janus says.
  2. Nearly all (93%) of the HR/benefits executives responding to the survey believe that personalized benefit communications are important for recruitment, retention and education. Yet only 55% of them use any kind of total compensation statements. "There is a very strong feeling that employees don't get it. Companies know what to do about it, but many of them are not taking those steps," says Janus.

Personalized benefit statements help to educate employees about important areas of their financial lives, says Janus, and in so doing help them to appreciate the contributions the company is making. As the benefits world moves farther from paternalism and closer toward consumerism, the financial impact of benefits becomes a critical piece of employee knowledge. "We've come to a point where most employees, in addition to their day job, are also essentially their own pension managers," Janus says. "In that role, workers need to have a much better understanding of their current retirement benefit situation, the future implications of decisions they're making today about contributing, understanding investments, understanding asset allocation; all of these things are critical.

"In the past, if you earned a reasonably decent living and lived within your means all your life, you were set for retirement. Now, people have more opportunities as far as their retirement savings, along with much greater risks than a generation ago. Whether you see that as good or bad, that's the way it is."

Let employees know who's paying lion's share

Employees also need more information about their other benefits. "The fact of the matter is that someone who is earning, say, $65,000, can easily have total compensation of $75,000 to $85,000 or more, depending on their particular elections and their particular employer," Janus says. "The point is that the compensation they receive is far more than what they see on their paycheck. The company contributes toward health insurance coverage, a 401(k) match or other employer retirement contribution, life insurance coverage, disability coverage. These are all things which most employees don't have in front of them most of the time. Health insurance is a big one, obviously. Everybody knows that the year-to-year increases in health insurance costs far exceed inflation--or anything reasonable.

"Most employees feel the pain of an increase each year, because their premiums go up or their co-pays go up. But what most of them don't realize is that, in most cases, the employers are actually absorbing the lions' share of those increases. The Kaiser Family Foundation does a survey every year of employer sponsored health insurance. It shows that the majority of U.S. employers pay somewhere upwards of 75% - 80% of the cost of health insurance. So even though employees are feeling more pain, employers are feeling it even more. That message is lost on employees."

What can you do? Janus suggests distributing an annual statement of total compensation. Of course, you can seek consulting help on this kind of project. Or you can put them together on your own. "We recommend that companies simply put the numbers out there in front of employees," Janus says. "For example, an employee knows that he or she is paying, say, $3,000 a year for health insurance. But through a personalized benefit statement, the employee can see that the employer is paying an additional $6,000 or $7,000 for that insurance. Simply putting that individual information in front of employees is very effective.

"The aggregate figures are less effective. An employer can put together some sort of communication that says the company spent $10 million on employee health insurance in 2006, and some will read that and say, well, it's a cost of doing business. But if an employee sees that the company is actually paying X thousands of dollars for his or her own insurance, that has a different impact. That's what we recommend."

 Information can counteract turnover

"One of the strongest pieces of anecdotal evidence I've received that this works is a story told to me by one of our clients," Janus says. "The company uses our web-based system. They have a very valued employee who had given notice that they had received an offer from a competitor. The employee's manager asked if the employee had taken a look online at total compensation. When the employee said no, the manager sat down with the employee and went through the personalized total compensation information. The employee withdrew the resignation and decided to stay with the company. Another company may offer $5,000 more in salary, and that's great. But what if that employer has a far weaker benefits package? Total compensation may end up being less."

Janus feels that most companies can benefit from using total compensation statements. "Unless you know, through surveys or other means, that your employees are really happy and very knowledgeable, it would be reasonable to assume they could be better educated about their benefits. If you look at the cost of doing this, as a percentage of the total compensation and benefits budget, it's a tiny percentage. So for a very small investment, you can significantly increase the return on the investment being made in compensation and benefits by simply educating and informing people about what they have. That's really the point we think is important."

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